Select Committee on European Union Twentieth Report


27. Witnesses were sharply divided both on the general question of the desirability of Community involvement in social policy, and in particular on the significance of the Social Policy Agenda. One view was argued by the General Secretary of the Trades Union Congress, John Monks, who saw a "big role for social policy in the European Union … The idea of a single market, a single currency, without social standards is something that we cannot accept". At the other extreme, Peter Lilley MP, former Secretary of State for Social Security, saw the Agenda "in the context of the long-standing desire among Euro-federalists to build a 'Social Europe'", and so to persuade people "to transfer their loyalty from their nations to Europe". The Institute of Directors ("IOD") were equally hostile, arguing that European social policy revealed "a suspicion of market forces which 'justifies' Government intervention and regulation". (Q 123, pp. 23, 75).

28. The Government broadly welcomed the Social Policy Agenda, but significantly their welcome was couched in the language of the Lisbon conclusions. Baroness Jay emphasised that "the Lisbon objective for the EU to become the most competitive and dynamic knowledge based economy in the world is integral to the Social Policy Agenda". Later she described it as "innovative in that it focuses so sharply on agreements made at Lisbon". The co-ordination and modernisation of Community social policy was desirable "in order to meet that overall Lisbon goal, not only to achieve competitive success, but to create more and better jobs and to move towards greater social cohesion" (Q 81).

29. The Government clearly believes that the Social Policy Agenda is consistent with the objectives and strategy defined at Lisbon. Some of our witnesses agreed. The TUC argued that the Agenda formed "one part, albeit an important one, of the overall programme flowing from the adoption of the strategic goal at Lisbon". Mr Claude Moraes, a Member of the European Parliament, saw it as a "modernisation agenda", which "should appeal across the board". Others were less convinced. The Confederation of British Industry wrote:

    The CBI welcomes the fact that the key objectives of the Social Policy Agenda reflect the headline conclusions of the Lisbon Special Council. However, some of the specific actions detailed under these broad headlines are neither of the type nor set at the level which would be most effective in reaching the objectives agreed at Lisbon.

Later the CBI repeated that "the Agenda risks moving away from the conclusions of the Lisbon Summit and extending EU competence" (p. 45, Q 137, pp. 62, 64).

30. Graham Mather, of the European Policy Forum ("EPF") explored the influences upon the Social Policy Agenda, including the Lisbon summit, in detail. He argued that the document revealed "strong tensions between the agenda of the Lisbon summit, envisaging fast track liberalisation of European markets and a European rapprochement with global markets on the one hand and the European social model on the other". To support this assertion, he cited the Report of the Employment and Social Affairs Committee of the European Parliament[23]. This Report argues that "the social agenda could be improved from the point of view of binding instruments", including "harmonisation" of social rules, and "the adoption of minimum standards and prescriptions which will gradually create a high level of social rights for workers and others throughout the Union's Member States". Mr Mather deduced that "the 'old' social model agenda is alive and well". Even Mr Monks, despite arguing that the Agenda was consistent with the Lisbon objectives, conceded that there was "a battle going on between the deregulators … and the ones who seek to build a stronger European competence". Mr Lilley went further, arguing that the Agenda was in line with a long tradition of regulatory Commission documents, "with the introduction of a few words to … pay lip-service to the concerns of the British Government"[24] (pp. 70, 72, QQ 133, 57).

31. Mme Odile Quintin, Director General of the Commission's Directorate General for Employment and Social Affairs, attempted to reconcile the Lisbon agenda of modernisation with the strengthening of the traditional "European social model". She too argued that the "main focus" of the Agenda was "to implement the Lisbon Conclusions". In achieving this the Commission had had to strike a balance, finding a position "between the strengthening of the 'European social model' and its modernisation". The two objectives were in fact inter-dependent: "European social values are important to maintain and strengthen, but to be maintained and strengthened they needed to be modernised". Thus "modernisation" did not stand for "dismantling what currently exists"; but "neither does strengthening necessarily mean more legislation or more costs" (QQ 38, 40).

32. Such analyses beg the questions of whether there is in fact a single "European social model"; and if there is, where the United Kingdom stands in relation to it. The CBI was clear: "the notion of a single 'European Social Model' does not adequately describe the patchwork of differing labour markets and social security systems that make up the EU". The UK, with its "relative deficiency in skills" and its flexibility in other areas, was part of this patchwork. The Institute of Directors disagreed: the European social model had become "'sclerotic' and over-regulated"; in contrast, "The UK … hasn't had the 'European Social Model'—it has had the 'Enterprise' model over the last two decades which has served it well". There was now a danger that the "enterprise" model would be replaced by a form of "European social model". Mr Lilley also saw "very distinct differences … between the predominant pattern on the continent and that in the United Kingdom". Underlying these comments is the belief that the United Kingdom embodies what Mr Lilley called the "Anglo-Saxon" approach—an approach shared by Europe's major competitor, the United States. On the other hand, there are also clear variations between the countries on the continent—the Netherlands, for instance, currently has a good rate of growth and very low unemployment, combined with high levels of social protection. Mr Monks, contrasting the UK and Germany, argued that the Netherlands "manages to bridge the two with great gusto" (pp. 62, 78, QQ 53, 118).

33. If there is indeed a "European social model", it can only be defined in broad terms. The TUC described the European project as an "historic compromise": it had liberalised markets and unleashed economic energy, but there had been a recognition that "these new market forces can have damaging social effects". The result was the European social model, which stood out most clearly when compared with the American model. It was characterised by

    a commitment to strong welfare states, with a determination not to let the unemployed and underprivileged suffer real poverty; a commitment to partnership between governments, employers and workers; a strong role for trade unions and employment protection law, ensuring minimum standards. This contrasts with the USA, where the employment rate may be higher but 35 million people are without health insurance, the prison population is enormous, there are huge inequalities … and there is an easy 'hire and fire' labour market.

Ms Catherine Barnard, of Trinity College Cambridge, saw the constant emphasis on "modernisation" in the Social Policy Agenda as an attempt to reconcile these two approaches, European and American. It represented the "third way approach of balancing some form of employment rights and rights for those who are excluded from the labour market but with a competitive labour market". The Agenda was balancing the "deregulatory agenda that typified the so-called Anglo-Saxon approach ... and the more so-called continental approach of high social benefits, high levels of unemployment" (pp. 47-48, Q 26).

34. Several witnesses noted that "modernisation", a key word in the Social Policy Agenda, is never defined. As a result there were differing views on what the content and likely effect of the Agenda actually were. Mme Quintin summed up the view of the Commission: the Agenda was intended to establish what the Commissioner, Mrs Diamantopoulou, had called "a balanced 'triangularism' … between sound economic policy; between employment policy … and social policy". This balancing of different aspects of policy would give the Community "a flexibility to adapt to the new needs and evolution of the new economy". Quotations from the Social Policy Agenda have been given in Part 3 above, which attempt to show that these different areas of policy are in fact interdependent—that social policy should be seen as a "productive factor", and economic growth as a means to improve the standard of living for all. Such attempts may be seen as an extension of what the TUC called the "historic compromise" of the European project in response to globalisation. As Ms Barnard pointed out, Member States have accepted the "social dimension" of the EU by virtue of the "incorporation of the Social Chapter in the EC Treaty" at Amsterdam. At the same time the rapid developments in the world economy, and the EU's relatively poor performance relative to the USA, have demonstrated the need, which was acknowledged at Lisbon, for liberalised markets and a flexible, adaptable work-force. As a result, the Agenda was "attempting to reconcile flexibility and security"—to achieve "flex-security". There was a quid pro quo: "flexibility for employers … security for workers". The Community was aiming for a highly skilled and productive work-force, trying to use social policy (for instance education and training, active employment policies) as "an input into growth rather than as either a consequence of growth … or … a drain or burden on growth" (QQ 38, 5, 1).

35. Underlying this balancing act—what Mme Quintin called policy "triangularism", and Ms Barnard "flex-security"—are several unresolved economic arguments. This summary can do no more than give a flavour of some of those that emerged in the course of the inquiry. The Institute of Directors, for example, described as "not very helpful" the use of the terms "flexibility" and "security" as antonyms, which needed to be balanced. Instead they argued that "job security should not be seen to be about employment protection, it should be seen to be about creating a dynamic, competitive and fast moving business sector that can then create wealth and jobs". The TUC, in contrast, argued that "the impact of economic change on workers and citizens means that fundamental social, political, civic and trade union rights need to be strengthened". Mr Monks, in oral evidence, highlighted the fact that the "flexibility" of the UK's labour market had encouraged multi-national companies, when down-sizing or restructuring, "to do it here". He acknowledged, however, the other side of the coin—that the same flexibility that allowed easy dismissal also encouraged "a disproportionately good share of inward investment" (although this was being blocked at present by the high value of the pound). The TUC argued further that there could be "a positive correlation between social expenditure and the level of productivity". Mme Quintin agreed, focusing in particular on worker consultation: "countries which have higher productivity levels … have a stronger tradition of involvement of workers". While accepting this outline, the IOD put a very different gloss on it: "as higher labour costs deter job creation and encourage capital-intensive means of production, this can result in higher levels of labour productivity … Capital intensive methods are employed at the expense of job creation" (pp. 76-77, 48, Q 119, p. 46, Q 41, p. 76).

36. It will be clear from these differing views that the Commission's theory of "triangularism"—economic, employment and social policies all pulling in the same direction—is highly controversial. Moreover, witnesses differed sharply on how far the actual content of the Agenda would contribute to the development of a dynamic enterprise economy in Europe. Many in fact commented on the lack of explicit content. Mme Quintin said it was "not really … a legislative agenda". It set out broad objectives, but while there were many tools available to achieve these objectives, "there should not be any preconception of which tool to use". Mrs Jowell, Minister of State at the DfEE, went further, describing the Agenda as a "framework action programme … expressed at a level of generality and abstraction at times which make it quite hard to get hold of what is actually intended". Baroness Jay went so far as to describe the objectives as "rather Pollyanna-ish", but was confident that they were not "over-regulatory". Indeed, she argued strongly for the benefits of some of the objectives, notably the attempt to promote equality between the sexes, and in particular to raise the level of employment among women. She cited the fact that in the USA 50 percent of new businesses are started by women, and that "more people in the United States are now employed by women-owned small firms than by men-owned small firms". There was great scope for encouraging enterprise by promoting equality. Overall, the Government accepted the "correlation between high levels of employment growth and low levels of regulation", and believed that the Agenda, when one went beyond the generality, would help promote employment. When asked to identify specific proposals which would contribute to this end, Baroness Jay focused on a range of objectives, including that at Paragraph "To develop a positive and pro-active approach to change by promoting adequate information for both companies and employees … adapting working conditions and contractual relations to the new economy with a view to fostering a renewed balance between flexibility and security". However, the more deregulatory objectives in the Agenda for the most part do not have corresponding actions. In the case of the objective quoted by Baroness Jay, the Government has in fact declared its opposition to one of the principal measures by which the Commission hopes to achieve it, the proposed Directive on informing and consulting workers, which Mrs Jowell described as "over-prescriptive and very ineffective". Mr Lilley, on the other hand, disagreed fundamentally with the Government's interpretation of the Agenda: "If modernisation is used as a code word to signify or imply a reduction in regulation and social spending … I cannot see any significant element in it that is moving in that direction". While there were few specific proposals in the Agenda, he saw it as starting "a momentum for a legal process"—it was bound to lead ultimately to "more regulation, more spending, higher taxation". In his written evidence he listed a number of specific proposals which in his view signified extensions of Community involvement in social affairs (QQ 42, 93, 90, 84-85, 89, 104, 52, 63, p. 24).

37. Underlying such arguments is the belief that European social policy—and in particular legislative measures such as the Working Time Directive—has placed a heavy burden on business, significantly damaging the ability of European economies to compete internationally. However, this is not necessarily the case. Ms Barnard contended that "what we have at Community level is far from heavy regulation". The number of directives covering social policy, she pointed out, was "relatively small". Some directives had, she conceded, caused difficulty—notably the "highly prescriptive" Working Time Directive. These difficulties had been compounded by the diligence with which the UK Government had implemented the Directive. Mr Monks went further, arguing that the problems should be blamed not on the Directive, but on the way it had been implemented: "We seem to make heavy weather of it … I think the Dutch did it over a couple days on one side of the paper, and then we have a legal document which is phenomenally complicated … The question mark is to the DTI rather than to the European Union" (QQ 20, 23, 123).

38. In fact, the Community is prevented from introducing extensive social legislation by its lack of explicit Treaty competence. Ms Barnard pointed out that such legislation covered only "employment matters, really quite narrowly defined". She went so far as to argue that "social policy is actually a misnomer". In reality, the Treaty bases for Community social policy were "quite closely linked to employment related matters, so poverty, social exclusion, is very much on the margins … I am not at all clear whether the EC has power to actually enact legislation in this field". This may help to explain and indeed justify the Commission's "triangularism" of economic, employment and social policy—within the limited sphere of Community competence, social policy is in fact largely a by-product of employment policy, and should be seen as contributing towards it. However, it raises the broader question of whether by setting targets for social policy in the context of employment the Community may lose sight of other elements of social policy. Mr Lilley, for example, noted that social protection for disabled people was one area where "unequivocally one should be in favour". Society should support those who "are unable to participate to the full in the market place and need the help of those who can". In such circumstances social policy would clearly not be a "productive factor", and there must be a chance that the Community's emphasis on the "productive" aspects of social policy may confuse the real issues (QQ 20, 18, 65).

39. This raises in turn the question of how much the measures described in the Social Policy Agenda are likely to benefit those outside the job market, including groups such as disabled people, who are particularly at risk of social exclusion. In its Report on EU proposals to combat discrimination the Committee examined the measures put forward by the Commission under Article 13 TEC. One of these, the Directive establishing a general framework for equal treatment in employment and occupation, was agreed by the Council of Ministers on 17 October. In addition, the disabled are a targeted group within the Luxembourg process. However, as Ms Barnard asked, "what about the disabled who are unable to work"? There is no indication within the Social Policy Agenda of a likely date for a disability-specific Directive, under Article 13, extending beyond the workplace. Mme Quintin also confirmed that funding at European level for bodies representing victims of discrimination of whatever sort was very limited. The Community could foster "exchange of good practice", but it was difficult to envisage substantial funding being available even to an umbrella group such as the European Disability Forum, still less for NGOs representing those with specific impairments. Support for groups representing the disabled will in practice remain the responsibility of Member States; Mr Monks noted that within the UK the newly-established Disability Rights Commission enjoyed wide support, not least from employers (QQ 8, 50, 122).

40. While the specific legislative proposals in the Social Policy Agenda may be limited to areas of strict Community competence, many matters outside that competence are discussed within the looser framework of co-operation and co-ordination among the Member States. This raises the possibility of "competence creep"—a gradual extension of Community involvement in social policy, beginning at the level of policy co-ordination and the setting of targets, moving through recommendations and action programmes and perhaps finally to legislation. Here again there was sharp disagreement between our witnesses. Mme Quintin stated her view that "I do not think … any element broadens the Community competence". In contrast, Mr Lilley saw the Agenda as the first step towards harmonisation of social provisions across the EU. He acknowledged that the document did not itself "advocate such a final objective", but argued that "even the longest journey starts with a single step. The first step is for the EU to establish its competence in this domain". Mr Mather of the EPF gave a more specific example: the Competition Commissioner, Mario Monti, had suggested a change to procedural rules within his Directorate General which might have the effect of implying a connection between information and consultation of workers and the clearance of merger proposals. This appeared to be "an example of legislative creep by questionable procedural innovation" (Q 48, pp. 23, 75).

41. The Government's approach was pragmatic: the Agenda itself had no legal force, and thus needed no legal base. However, legislative proposals emerging from it would be examined rigorously: "the United Kingdom Government would certainly resist any attempts to move beyond the Treaty competencies on matters which are included within the document". In the course of the inquiry the Government in fact lodged several objections to the use of Article 13 TEC as legal base for the proposed framework strategy on gender equality[25], which is one of the key measures proposed in the Agenda for advancing gender equality (Q 91).

42. On the other hand, Baroness Jay supported "the wider use of the informal partnership and open co-ordination in this area". Particularly prominent in the Agenda is the "open method of policy co-ordination" (familiar in the context of the employment strategy, where it dates from the Luxembourg summit of 1997), which was extended by the Lisbon summit to cover social policy. This method allows the Community to provide guidelines and support for Member States, encouraging them to "co-ordinate" their policies, while refraining from legislative intervention, or "harmonisation". The process is administered by the Commission, but relies on consensus among the Member States and inter-governmental agreement of the sort reached at Lisbon (and envisaged for future annual spring meetings of the European Council). The United Kingdom has been strongly in favour of the extension of this open method of policy co-ordination. Other witnesses also welcomed its use, including the CBI, who described it as "the most appropriate and effective method for delivering progress towards the Lisbon objectives of economic growth and greater employment". Witnesses generally hostile to the Social Policy Agenda also accepted that open co-ordination had advantages: the EPF argued that it had "much greater flexibility than traditional legislation, greater speed and stronger opportunities to share best practice in a true spirit of co-operation and emulation". Even the IOD grudgingly acknowledged that many of the proposals had "the advantage of being advisory rather than enforcing" (QQ 81, pp. 62, 73, 78).

43. However, the "open co-ordination" method still raises a number of questions. First is the question of whether there is in fact, as the Government appears to believe, a clear distinction between "soft" and "hard" law (this, of course, relates also to the issue of competence creep raised above). Ms Barnard gave the Committee an example of how "soft law" had evolved into "hard":

    There were originally plans for a Directive on sexual harassment … They could not get political agreement on that and so eventually you had a recommendation on sexual harassment … That recommendation was a soft law measure and a lot of people were disappointed that it did not have more teeth but now you see sexual harassment being included in the Directives on discrimination[26], so it has gone from soft law to hard law.

In other words, where issues are too controversial for Member States to be able to agree legislative measures (in particular in areas of borderline Community competence), they may nevertheless be willing to agree to "soft law" recommendations or guidelines. These may in turn prepare the way for legislation a few years down the line. In the case cited by Ms Barnard, the Community's competence to combat discrimination on grounds of sex was substantially extended by the Treaty of Amsterdam (see Articles 13 and 141 TEC). A "soft law" recommendation prepared the way for an extension of Community competence and ultimately for "hard" Community legislation. One can reasonably expect that a similar process will occur in some of the areas discussed in the Social Policy Agenda (Q 16).

44. Even where there is no prospect of "hard" Community legislation, the role of the Court of Justice in interpreting "soft" law cannot be ignored. Mme Quintin was quite clear that within the "open method of policy co-ordination" there was "no control by the European Court of Justice". Mrs Jowell was more cautious, pointing out in supplementary written evidence that the ECJ's principal focus was on the implementation of "hard law"—"the Treaties, Regulations, Directives and Decisions". However, she accepted that the Court could "take 'soft law' into account: "when considering how a 'hard law' provision is to be interpreted, it would be open to them to take into account a relevant recommendation which might help to throw light on the matter". In fact, the Court's readiness to take "soft law" into account has, in Ms Barnard's words, led to "quasi hard law effects". The Court, she said, had on occasion used "soft law" as "a vehicle to construe national law where national law was on the same subject matter". She cited the Court's decision in Grimaldi[27], that while recommendations "cannot in themselves confer rights on individuals upon which the latter may rely before national courts", those courts were "bound to take those recommendations into consideration". This is a complex area, and a lot depends on how "soft" the law is—simple policy co-ordination, for instance, of the sort that Mme Quintin seemed to be envisaging, may not have the same "quasi hard" effects as a formal recommendation (QQ 46, p. 44, Q 16).

45. The other side of the coin is that there may be issues on which some Member States or interested parties would wish to see clear principles being established, but where the "soft law" approach may be inadequate. One such issue concerns "fundamental social rights". Paragraph of the Agenda sets out the objective of ensuring "the development and respect of fundamental social rights". The Agenda looks to the adoption of the proposed Charter of Fundamental Rights to "provide a new impulse to this area". As an objective, this was welcomed warmly by the TUC, who argued that "fundamental social, political, civic and trade union rights need to be strengthened". However, it is notable that the specific actions proposed in the Agenda fall far short of this ambitious objective, and in particular it is unclear what role, if any, the Court will have. The CBI, on the other hand, criticised the "ambiguous" reference to the Charter—"the CBI does not believe that the future role of the Charter is to act as a social action programme, putting political pressure on Council members to accept an extension of EU level action in areas which they have previously argued should be left to national law and practice". This is a controversial area, and the UK Government has been particularly vehement in insisting that the Charter should not be legally binding[28]. It may be that the Social Policy Agenda will only add to the controversy (pp. 48, 65).

46. The "open method of co-ordination" relies upon inter-governmental agreements, particularly those reached at meetings of the European Council. Governments will compare best practice, set benchmarks and targets, and timetables to meet these targets. At present there is a broad centre-left consensus among the governments of the EU, and thus general agreement about many areas of social policy. However, there is clearly a danger that the consensus may break down in the future. This begs the question of how such targets will be enforced, and indeed whether they should be enforced. As Ms Barnard pointed out, targets represent a "carrot", but there is no "stick" to back them up. The whole process relies on the fact that all Member States "are willing to play by the rules of the game". When asked what confidence one could have that other Member States would meet the benchmarks, Baroness Jay in effect fell back on good will, the "positive virtues of the comparative experience of the benchmarking". In practice, however, things may be different—some witnesses suggested that "peer review" might in effect turn into moral blackmail. The EPF suggested that "the peer review procedure may turn into an 'arm twisting' system in which lightly regulated Member States are pressured to bring their regulatory burdens up to the levels of less competitive economies". The Employers' Forum on Statute and Practice ("EFSP") also argued that "benchmarking has developed into a process which is sometimes akin to 'naming and shaming'". Mr Lilley went so far as to describe open policy co-ordination as "harmonisation by another name" (QQ 16, 103, pp. 73, 70, 25).

47. In this context, the Committee also asked about the effect of the Social Policy Agenda upon applicant states. Mme Quintin confirmed that there had been "a series of meetings about employment and social policy" with applicants. Clearly legislative proposals would form part of the acquis—their adoption would be a condition of accession. However, Mme Quintin said further that the applicants had been "extremely keen on embarking on the employment process"—indeed, they had adopted "national action plans related to our strategy". It thus appears that even in the absence of the means to enforce policy harmonisation formally through the acquis communautaire, the applicant states are likely to strive to keep in step with developments within the EU (Q 44).

48. Underlying the open method of policy co-ordination is the belief that states can learn from one another by comparing practices across a range of issues. No-one challenged this belief. Baroness Jay accepted that while the UK had much to be proud of it was nevertheless in some areas (for example, equality) "lagging behind" and could learn from its neighbours. Mr Monks also argued that while we had "things that we can pat ourselves on the back for", we should nevertheless look "with a degree of humility … at the experiences of other countries". The Netherlands was in many respects the "modern exemplar" on the European mainland, but the EU as a whole could also benefit from absorbing the lessons of America's success—"its technology and leadership … its vitality and energy". On the other hand, Mr Lilley pointed out that governments had always engaged in informal comparison—as Secretary of State for Social Security he had encouraged his officials to absorb lessons from other countries, including New Zealand and Sweden, in developing long-term strategy. But he argued that for such comparison to work countries had to be free to pursue different policies: "there is a lot to be learned from other countries, but only from other countries that have the freedom to do different things from you. If you are in a system where you all do the same thing, you do not get that advantage". Europe, in contrast, had "a tendency … to enforce unnecessary similarity" (QQ 103, 118, 72, 74).

49. The final point to be made about the open method of policy co-ordination is a concern over democratic accountability and the role of elected parliaments. The EU's employment strategy (since 1997) and the broader strategy agreed at Lisbon rely on inter-governmental agreements. As a result the European Parliament is, in Ms Barnard's words, "rather sidelined". The Resolution adopted by the Parliament on 25 October appears to confirm this perception, arguing in favour of Community legislation, which "maintains democratic parliamentary influence and judicial controls over the Union's decisions". Mme Quintin acknowledged that whereas according to Article 251 TEC the EP has a right of co-decision for most legislative proposals it has no such right in the context of open policy co-ordination. Its role appears to depend largely on the good will of the Commission and Council: "In the context of the open method of co-ordination we have consulted the European Parliament … We pay strong attention to the views of the European Parliament". However, it is unclear how this will work in practice. Mr Lilley agreed that it was "very difficult" to hold governments to account for decisions reached within the Council. Drawing on his own experience, he continued, "It is fun negotiating … through the night and so on and not having to worry about what your constituents think, because there is nothing much they can do about it". Whether or not one advocates more Community legislation, the lack of democratic accountability in the process envisaged in the Social Policy Agenda inevitably concerns a Committee of a national parliament. If the role envisaged for the European Parliament is small, that for national parliaments is likely to be still smaller. The Agenda gives on page 14 a list of "actors" whose participation would lead to "an improved form of governance". They include the Commission, Council and European Parliament, national governments and local authorities, the social partners and NGOs. No mention is made of national parliaments. Baroness Jay, however, argued that this was no more than an unfortunate turn of phrase—"I assume that 'national governments' must mean 'national parliaments'" (QQ 35, 49, 78, 99).

50. Although the open method of co-ordination raised this wide range of concerns, witnesses for the most part agreed that it had the merit of allowing a degree of flexibility to Member States. It was thus in keeping with the principle of subsidiarity. Ms Barnard, for instance, pointed out that in the absence of clear Community competence in many of these areas, the "soft law" approach does "allow at least some room for the national systems to try to work out what is the best arrangement in their own country, bearing in mind the vastly different heritage of … traditions". The EFSP, in contrast, argued that the complexity of the operations of labour markets provided "compelling reasons" why any action "should not be undertaken at European level" (Q 27, p. 66).

51. One aspect of subsidiarity at European level is the role given to the social partners, management and labour. Not only do they participate fully in the implementation of measures concerning the workplace, but they are empowered by Article 139 TEC (deriving from the Social Chapter, and incorporated in the EC Treaty at Amsterdam) to negotiate European level agreements which may be implemented by Council decision—usually a directive. This procedure is justified by reference to subsidiarity—in Ms Barnard's words, "giving a role for the social partners is seen very much as an aspect of subsidiarity, because those who are deciding matters are closer to those affected". Mme Quintin argued that it was "positive" for the social partners to be "able to come to a balance between them of mutual interests". It was "a good implementation of the principle of subsidiarity that when they can come to such deals, it is better that the public authorities just let them do so". It is clear that some of the agreements that have been reached by means of this procedure have respected the principle of subsidiarity in practice as well as in theory. Ms Barnard cited the Parental Leave Directive of 1996, which simply set down "two key rights"—the right to time off for parents, and the right to time off on grounds of force majeure. However, all of the detailed implementation had been left "to the Member States or to the social partners at national and sub national level to determine". Despite this, the CBI expressed some concern that subsidiarity might be undermined by EU level agreements. While acknowledging that the social partners at this level could "add value by promoting the exchange of information and best practice", the CBI felt that the social partners at "national or local level" were "best placed to determine objectives and areas suitable for negotiations/dialogue" (QQ 9, 43, 11-12, p. 64).

52. This procedure is relatively familiar in many Member States—as Ms Barnard pointed out, in Belgium it is "quite standard that some form of administrative act just extends the content of the collective agreement". However, in the United Kingdom it is both little known and controversial—indeed, in the EPF's words, it is "dramatically at variance" with the UK's system. Nevertheless, the TUC were whole-heartedly in favour:

    We have available to us a dynamic system that we can use to introduce better regulation in a much more flexible manner. It is much more flexible for the social partners to negotiate proposals that can fit the realities of the shop and office floor. It is better regulation to establish principles at the European level that can then be adapted to the national, sectoral and the local plant or workplace level. This is preferable to going down the legislative pathway alone.

The CBI, on the other hand, which like the TUC participates in the work of the social partners at European level, was more reserved. It argued that it was "important that employers and representatives of the workforce are fully consulted in the development of social policy"; in particular it was desirable to draw on the social partners' "detailed knowledge of conditions and concerns within actual companies and workplaces" when preparing relevant EU legislation. However, such negotiation should "follow on from rather than pre-empt a mandate from the Council of Ministers" (Q 15, pp. 47, 63).

53. Detailed concerns about the Article 139 procedure were raised by a number of witnesses. The first was democratic accountability. There is no input into agreements reached by the social partners from either the Council or the directly elected European Parliament. In Ms Barnard's words, "once the agreement is negotiated it is then given to the Commission, the Commission makes a proposal and the Council adopts that proposal or rejects that proposal. To date the Council has only adopted the proposal. There is no role whatsoever for the European Parliament in that process". There is no possibility for the agreement to be revised: as the EFSP commented, the Commission, Parliament and Council "can accept or reject any proposal … they cannot, however, amend it". The result, arguably, is what Ms Barnard called a "lack of democratic accountability and … lack of transparency". National parliaments have an input only when the Directive comes to be transposed into national law; the EFSP described them as a "rubber stamp". In contrast Mr Monks of the TUC, while acknowledging that the procedure "tends to offend the way Parliaments think", claimed that it was justified by the flexibility of the agreements resulting from it: "the test should be pragmatic". Mme Quintin was also pragmatic, claiming that in practice the European Parliament could make its views known: "We have always managed … in a practical way, and Parliament has started to express their views about the Social Partners agreement". An informal exchange of views, however, falls far short of giving the European Parliament a formal role in shaping the legislation resulting from such agreements. Baroness Jay's response to these points shed little light:

    I would say, insofar as I have practical experience of being involved in this, that since the Government's perspective is that because you have the social partners also, although not under that particular heading, including representatives from the European Parliament or other organisations with them, or democratic mandate in some of the voluntary organisations, you do have that connection back into the policy base that we would, perhaps, expect more domestically.

Lady Jay did, on the other hand, point out that the Article 139 process could only occur in response to a consultation initiated by the Commission; Mrs Jowell pointed out also that the final decision rested with the Council. However, neither Commission nor Council have any control over the final content of social partner agreements (QQ 14-15, p. 67, QQ 125, 49, 105).

54. Related to the issue of democratic accountability is the question of how far the "social partners" at the EU level are in fact representative of the interests of employers and workers. The organisations that have negotiated agreements hitherto have been UNICE, the employers' association, CEEP, the public sector employers' association, and ETUC, the European TUC. As Baroness Jay asked, "who do you … ask to represent people who do not have a formal representative organisation acting on their behalf?" She noted that the small high-tech businesses that feature so prominently in the Lisbon conclusions "do not have the traditional representative bodies which would be given a place at the table". Nor were Governments, as employers, included in the process. Similarly, Ms Barnard pointed out that consumers play no formal role in the social dialogue. The EFSP were convinced that the social partners were "not representative". In fact the model of the European social partners dates back to the European Coal and Steel Community, formed in 1951. This was formed around a few major industries, which had heavily unionised workforces. The relevance of this model to the contemporary world, in which most employees work for small and commonly unaffiliated businesses, and union membership is low (perhaps as low as ten percent in France), is open to question. In fact, as both Ms Barnard and Mme Quintin noted, the representativity of the social partners, and thus the legitimacy of the Parental Leave Directive, was unsuccessfully challenged before the Court of First Instance by UEAPME, a group representing small and medium sized enterprises[29]. UEAPME is now itself involved in the work of the social partners. Nevertheless, Mme Quintin said that the Commission's forthcoming white paper on European governance would look at the role of "civic society", including the social partners, NGOs and other bodies (QQ 111, 7, p. 67, Q 45).

55. The EFSP, who criticised the system of the social partners in considerable detail, also suggested a range of proposals for its improvement. They argued that any improvements to the representativity of the social partners could only be "marginal". Instead of turning the social dialogue into "a quasi-legislature prescribing particular approaches, it should focus on what the social partners could do best—to establish and promote ideas of best practice to enhance competitiveness". Contacts between bodies involved in the dialogue, such as the CBI, and employers or other interested parties, should be improved. The social partners and their constituent organisations should be required to "make an impact assessment of their proposals, country by country, at each stage in the negotiations". Those who would actually have to implement any agreements should be enabled to "make practically informed submissions throughout": this would necessitate better publicity in the press and the internet, with interested parties being able to post responses on a "generally accessible noticeboard" (pp. 68-69).

23  Report on the Commission communication to the Council, European Parliament, the Economic and Social Committee and the Committee of the Regions on the social policy agenda, 16 October 2000. The Rapporteur was Mrs Anne Van Lancker. Back

24  Events towards the end of the Committee's inquiry exposed the tensions underlying EU social policy. On 9 November the French Presidency published their own paper on the Social Policy Agenda (document 12619/00), which was heavily criticised by the Commission and other Member States for undermining the Lisbon conclusions. The Commissioner for Employment and Social Affairs, Mrs Diamantopoulou, is quoted as calling it "traditional and old-fashioned". See "Paris under attack on social plans" (Financial Times, 21 November) and "EU rejects France's 'backward' agenda" (Times, 22 November). Back

25  Communication from the Commission to the Council, the European Parliament, the Economic and Social Committee and the Committee of the Regions "Towards a Community framework strategy on gender equality (2001-2005)" and Proposal for a Council Decision on the Programme relating to the Community framework strategy on gender equality (2001-2005), 11 July 2000 (document 8638/00). Back

26  See the Proposed Directive amending Council Directive 76/207/EEC on the implementation of the principle of equal treatment for men and women as regards access to employment, vocational training and promotion, and working conditions, 14 July 2000 (document 10382/00). Back

27  Case C-322/88 Grimaldi v Fonds des maladies professionelles [1989] ECR 4407. Back

28  For a discussion of the potential legal effects of a non-binding Charter of Fundamental Rights see the Committee's Report on the EU Charter of Fundamental Rights (8th Report, Session 1999-2000, HL Paper 67), paragraphs 122-127. Back

29  Case T-135/96 UEAPME v Council [1998] ECR II-2335. However, as stated above (paragraph 9), this decision was without prejudice to future decisions on representativity. Back

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